Propping up the capital market: The right year to make a giant leap
Skip to main content
  • Home
  • Economy
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Features
  • Epaper
  • More
    • Subscribe
    • COVID-19
    • Bangladesh
    • Splash
    • Videos
    • Games
    • Long Read
    • Infograph
    • Interviews
    • Offbeat
    • Thoughts
    • Podcast
    • Quiz
    • Tech
    • Archive
    • Trial By Trivia
    • Magazine
    • Supplement
  • বাংলা
The Business Standard

Wednesday
August 17, 2022

Sign In
Subscribe
  • Home
  • Economy
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Features
  • Epaper
  • More
    • Subscribe
    • COVID-19
    • Bangladesh
    • Splash
    • Videos
    • Games
    • Long Read
    • Infograph
    • Interviews
    • Offbeat
    • Thoughts
    • Podcast
    • Quiz
    • Tech
    • Archive
    • Trial By Trivia
    • Magazine
    • Supplement
  • বাংলা
WEDNESDAY, AUGUST 17, 2022
Propping up the capital market: The right year to make a giant leap

Panorama

Asif Khan
07 February, 2021, 12:10 pm
Last modified: 07 February, 2021, 12:15 pm

Related News

  • BSEC probe of Oimex Electrode
  • Standard Bank congratulates BSEC chairman 
  • Prof Shibli Rubaiyat elected Vice Chair for IOSCO
  • Capital market prepares to facilitate startups
  • Hiru, associates fined Tk5.25cr for manipulating Fortune Shoes, NRBC Bank shares

Propping up the capital market: The right year to make a giant leap

2021 gives us a unique opportunity as the stock market remains vibrant. This is the right year to make a giant leap with all the positive tailwinds behind us

Asif Khan
07 February, 2021, 12:10 pm
Last modified: 07 February, 2021, 12:15 pm
Photo: Mumint M/TBS
Photo: Mumint M/TBS

For the first time in its 28 years of establishment, the Bangladesh Securities and Exchange Commission (BSEC) has taken the initiative to attract investment from foreign and NRB investors. It has introduced a flagship Dubai-based roadshow, "Rising of the Bengal Tiger: Potentials of Bangladesh Capital Markets Investors" this February. Simultaneously, the commission plans to introduce four new financial products (sukuk, ETFs, green bonds and derivatives) to diversify the capital market and improve market depth. Such initiatives and the dynamism shown by the BSEC is great news for the capital market and a step in the right direction.   

Dubai roadshow should be a precursor to more in other locations

The roadshow in Dubai is a welcome development for two reasons:

Firstly, Bangladesh lags behind peer countries in selling itself as a viable investment destination. Yet, it has a large population with a fast-growing economy where many macro fundamentals like debt levels are better than many peer nations. The opportunities that exist across the different asset classes – including public equity, private equity, venture capital, the fixed income asset class – can all be promoted to the right-minded investors located abroad. 

Secondly, roadshows are a great way to establish a dialogue between foreign investors and the BSEC. Both parties will be able to understand the priorities of each other and thus can make the investing process much smoother. The learnings from this roadshow can be applied to future roadshows in cities such as New York, Singapore or London where a much larger number of emerging market-focused funds are located. The experience gained from this roadshow in terms of creating the right panels, choosing the best speakers, marketing the event, building global partnerships, etc can be effective in other respects too.

New products will deepen the market but a priority list can help

The new financial products the BSEC is planning for can help bring a different set of investors in the capital market who have different risk/return preferences. However, in my opinion, it would be good to prioritize some of these products over others considering the necessity and maturity of our participants.  

Sukuk is by far the most important as Islamic minded individuals have very little options to choose from. The same problem exists for Islamic Banks as well. Introduction of Sukuk can solve a big problem and therefore, the probability of a successful launch is significantly higher. Listing of the Sukuk can also help attract new investors in the capital market. 

Next comes ETFs. ETFs are an affordable way to give exposure to the stock market. In my view, the BSEC should consider launching multiple ETFs at once instead of just one based on the broad DSEX index. ETF created on DS30 and DSES (for Shariah-compliant investors) might provide a better risk-adjusted return to investors.    

Green bonds are of major importance to a country like Bangladesh as we are vulnerable to climate change. However, I am keeping it lower down the priority list as our investors are yet to be familiar with plain vanilla corporate bonds. Green bonds add an extra leg of complexity in terms of ensuring that the proceeds are indeed going to green projects.  

Lastly, we have derivatives. Derivatives such as forwards, futures, swaps and options are also complex instruments. Before moving to these, the natural first step should be the implementation of the short-selling guidelines that the SEC has already worked on.  

Further expectations from the regulator

As previously mentioned, the steps taken by the BSEC are highly commendable. Good decisions, however, tend to raise expectations. 

We believe that there is a scope to look into the IPO valuation methods. Some of the methods like the average price of similar stocks are outdated as it takes no consideration of the number of shares or fundamentals such as Revenue or Earnings. A comprehensive review of the valuation methods shown in prospectuses will be good for all stakeholders. Additionally, there is a new generation of companies which tend to leverage technology. These companies are often very fast-growing and disruptive. And they sometimes show accounting losses. Creating access for a select group of such technology driven start-ups to get listed can also be highly beneficial. 

Another area where there also has been progress but scope remains for improvement is on quality of financial statements and minority investor protection. The SEC has rightly identified and clamped down on areas such as sister company loans. 

Finally, the responsibility to develop the market cannot solely fall on the stock market regulator. All other stakeholders including brokerages, merchant banks, asset managers and commercial banks have to step up from their respective positions. 

2021 gives us a unique opportunity as the stock market remains vibrant. This is the right year to make a giant leap with all the positive tailwinds behind us.


The author is a Managing Partner at EDGE Research & Consulting Limited

Top News

Capital / BSEC

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • Opposition supporters march during a protest against inflation, political destabilization, and fuel price hikes in Rawalpindi, Pakistan, on July 2. FAROOQ NAEEM/AFP VIA GETTY IMAGES
    Pakistan is drowning in debt
  • Photo: Noor-A-Alam
    Money exchangers can't profit more than Tk1.5 per dollar: BB
  • HC asks why delay in removing Wasa MD should not be declared illegal
    HC asks why delay in removing Wasa MD should not be declared illegal

MOST VIEWED

  • An operator does not just lift the girder and set it up at will. It is impossible. There is a process at every step. Where is the process?” Photo: TBS
    Blood on their hands
  • On 4 June 2022, a blast occurred at the BM Inland Container Depot in Sitakunda, Chattogram. In the rescue missions, more than 10 firefighters died and at least three are still missing.  Photo: Mohammad Minhaj Uddin/TBS
    Firefighters at the mercy of fires
  • Facebook has been working on BlenderBot 3 for several years as part of its artificial-intelligence research. Photo: Bloomberg
    Facebook does something right for a change
  • Illustration: TBS
    Anwar Group: From comb maker to owner of 20 companies
  • Photo: Mumit M/TBS
    Why artificial oyster reefs are the answer to our coastal embankments problems
  • Perhaps it was the respite while in jail that helped Bangabandhu think about wildlife conservation. Photo: Archive
    The day Bangabandhu surprised Guy Mountfort

Related News

  • BSEC probe of Oimex Electrode
  • Standard Bank congratulates BSEC chairman 
  • Prof Shibli Rubaiyat elected Vice Chair for IOSCO
  • Capital market prepares to facilitate startups
  • Hiru, associates fined Tk5.25cr for manipulating Fortune Shoes, NRBC Bank shares

Features

Photo: Collected

Which Nintendo Switch should you switch to?

22h | Brands
Photo: Collected

Welcome to the age of glass facades

1d | Habitat
Photo: Mumit M/TBS

Why artificial oyster reefs are the answer to our coastal embankments problems

1d | Panorama
Illustration: TBS

Anwar Group: From comb maker to owner of 20 companies

1d | Panorama

More Videos from TBS

Football academies to be built in 3 districts

Football academies to be built in 3 districts

56m | Videos
Russia will stand by its allies: Putin

Russia will stand by its allies: Putin

4h | Videos
BRT: A hazardous and troublesome project

BRT: A hazardous and troublesome project

8h | Videos
Reasons why wild animals are moving into cities

Reasons why wild animals are moving into cities

8h | Videos

Most Read

1
From left Afzal Karim, Murshedul Kabir and Mohammad Jahangir
Banking

Sonali, Agrani and Rupali banks get new MDs

2
Photo: TBS
Bangladesh

5 crushed to death as BRT girder falls on car in Uttara

3
Dollar price drops by Tk8 in kerb market
Economy

Dollar price drops by Tk8 in kerb market

4
Representational Image. Photo: Collected
Bangladesh

Air passengers should plan extra commute time to airport: DMP

5
Dollar crisis: BB orders removal of 6 banks’ treasury chiefs 
Banking

Dollar crisis: BB orders removal of 6 banks’ treasury chiefs 

6
Ambassador of Switzerland to Bangladesh Nathalie Chuard. Photo: Courtesy
Bangladesh

Bangladesh never asked for particular info from Swiss bank: Ambassador

EMAIL US
[email protected]
FOLLOW US
WHATSAPP
+880 1847416158
The Business Standard
  • About Us
  • Contact us
  • Sitemap
  • Privacy Policy
  • Comment Policy
Copyright © 2022
The Business Standard All rights reserved
Technical Partner: RSI Lab

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - [email protected]

For advertisement- [email protected]